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Virtual CFO Service -A Smart Choice for The MSMEs

Preeti 
on 15 April 2021

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MSMEs (Micro Small and Medium Enterprises) are considered to be the backbone of the Indian economy considering their valuable contribution to the socio-economic development of the country. An MSME is relatively a small scale organisation where timely availability of funds and its proper management are extremely important for its long run sustainability and success.

With the augment of the 'Atmanirbhar Bharat' in the year 2020, MSMEs have gained even more recognition and consequently, a number of economic and financial reforms in the form of easy and affordable debt options to this sector have been formulated by the government. With the availability of funds been made easier by the government, the importance of managing them has increased manifold.

Proper management and utilisation of funds requires skills of an expert and that's where the CFO or the Chief Financial Officer comes into picture. A CFO is a part of the top management of an organisation whose primary responsibility includes providing professional advice, managing the financial risks, financial reporting, taxation, compliances and record-keeping.

While an in-house CFO can help the companies to navigate and become financially strong, most MSMEs cannot afford to appoint one. Thus, virtual CFO with his knowledge and team can provide expert services at affordable cost. Virtual CFO may not be present on-site all the time but will always be there when you need him. In present COVID situation a Virtual CFO is partner to protect you from financial crises.

Virtual CFO takes care of the financial health of MSMEs and allows them to concentrate on their core businesses.

A good virtual CFO service provider shall take care of the following services to a business such as:

  • Accounting and book-keeping
  • Taxation services like Income Tax, GST, Profession tax
  • Company Law
  • Compliance
  • Financial statement preparation and records management
  • Cash flow forecasting and budgeting
  • Banking services
  • Miscellaneous services

Let's elaborate on the above services for a better understanding.

Virtual CFO Service - A Smart Choice for The MSMEs

Accounting and book-keeping

With complex and timely legal compliance requirement it is necessary to do accurate accounting in timely manner in line with all the tax laws. While it is an option to have an in-house expertise to handle them, the other option of Virtual CFO (often appropriate for small and medium businesses) allows you to take the guidance of a CFO service to choose and conform with the appropriateness of data entered, set up systems, regular monitoring and reporting.

Tax services- Income Tax, GST, Profession tax

Small business owners are generally not aware that many of their daily decisions have direct or indirect impact on their taxes. They often make mistakes and end up paying higher taxes, interests and penalties. Support from your virtual CFO can help grow your awareness in the matters relating to your current tax status and tax implications of your decisions. It is better to be aware and cautious in time rather than getting hit by the unexpected tax at the end of the year. They can help you with reconciliation of 26AS (Income tax) or GSTR2A - 3B – Books (GST).They can also help you with tax planning and savings in turn. They can also help in timely and appropriate reply to various notices received from the tax departments.

 

Company Law

All the compliances and advisory related to company law matters can be provided by your virtual CFO.

Compliance

Nowadays there are heavy penal consequences for filing incorrect returns/forms or for not complying to legal issues in a timely manner. Compliance is one of the basic services provided by your virtual CFO, which enables your business to adhere to the necessary legal requirements in a timely manner as per all the latest provisions under the Income Tax Act, Companies Act, GST, Profession Tax Act etc.

Financial statement preparation and records management

Virtual CFO can help you prepare financial statements such as Profit and loss statement, Balance Sheet and Cash Flow Statements. These are like health reports of various aspects of a business, which are referenced to make quick decisions by the management. The evaluation and preparation of the statements are conducted on a monthly or weekly basis as per management's requirements.

 

Cash flow forecasting and budgeting

A better understanding of the cash position at a target period is key to take the right business decision. The cash flow forecasting by the virtual CFO informs you about how much extra fund will be required for a certain project and to make proper cash arrangements for timely execution.

Banking services

Any business has the peaks and the valleys in terms of sales and cash flow. But convincing statements help the businesses get loan from a bank even when there is a downturn. You can bank on your virtual CFO for the same.

Miscellaneous services

Your virtual CFO also offers miscellaneous financial services such as cost management, break-even analysis, debt planning, audit support, MIS reporting, Internal controls, etc.

The author is a practicing Chartered Accountants based in Mumbai and can also be reached at preeti@caspgupta.com


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